Groups representing the U.S. financial industry are trying to get the federal Securities and Exchange Commission to dilute proposed new regulations that would govern special purpose acquisition companies that industry representatives say could kill SPACs altogether, Reuters reported.
Investors establish SPACS — also called blank-check companies — and use them as vehicles for taking other companies public through mergers. One effect is that companies going public can avoid many aspects of regulation that companies holding traditional initial public offerings must go through.
“The agency should protect investors, but don’t kill industry,” Kurt Schacht, head of advocacy at the CFA Institute, wrote in a comment letter to the SEC, Reuters reported. The CFA Institute represents financial industry companies and also administers the program that can result in the awarding of the CFA charter for industry professionals.
Also questioning the proposed regulations, according to Reuters, were the American Securities Association and the SPAC Association. The groups argued that companies creating SPACs would be saddled with more liability than companies conducting traditional initial public offerings.
According to Reuters, investment banks have found a bonanza in arranging SPAC deals and haven’t had to put much of their own capital at risk in the process.
The proposed SEC regulation regarding liability and other possible rules may be too much for SPACs to continue, said Morris DeFeo, a partner at law firm at Herrick Feinstein LLP who advises SPAC sponsors and target companies.
“If you add up all of that, it’s going to certainly make people a little bit more skittish in using SPACs,” he said.
Anna Pinedo, a partner at Mayer Brown who advises groups conducting SPACs, said the proposed rules would make SPACs more difficult than IPOs to conduct.
An SEC spokesperson reportedly told Reuters the agency “benefits from robust engagement from the public and will review all comments submitted during the open comment period.”